Chinese Electrical Equipment Exports Exceed Expectations as AI Computing Drives New Opportunities in Prefabrication

Overview

Based on field surveys at industry meetings regarding data centers and smart energy held by J.P. Morgan in Shanghai, this report summarizes the latest trends in China's electrical equipment sector. The core conclusion is that the industry is experiencing dual drive from 'export expansion + AI computing': On one hand, penetration rates in the North American market exceeded expectations due to delivery and cost advantages; on the other, the high-density demands of AI data centers have catalyzed the application of new technologies such as solid-state transformers (SST) and prefabricated substations. While there is divergence regarding the commercialization of new technologies, institutions remain optimistic about the sector as a whole, heavily recommending Wasion Holdings and TGOOD Electric, which lead in export expansion and prefabricated solutions respectively.

Core views

Validation of Export Competitiveness and Outlook on U.S. Demand: The survey found that the number of Chinese electrical equipment suppliers securing U.S. orders exceeded expectations, primarily driven by significant advantages in delivery cycles (6-12 months domestically vs. 2-3 years overseas) and highly competitive pricing (gross margins reaching 30-40%, far higher than the double-digit levels in China). Although entry into the utilities segment faces hurdles due to certification barriers, data centers have become a key entry point, with some cloud service providers already visiting sites and placing orders. Looking ahead to 2027, as the procurement cycles for large-scale AI data centers fully launch and grid connection projects increase, U.S. market demand is expected to strengthen further. However, whether Chinese manufacturers can scale up significantly will depend on product certification and customer acceptance. Technological Iteration: Rise of Solid-State Transformers and Prefabricated Solutions: To meet the high-power density requirements of AI data centers, Eaton has launched a 2.5MW medium-voltage solid-state transformer (SST) in China, achieving conversion from 10kV AC to 800V DC with an efficiency of 98.5%. TGOOD Electric announced a strategic partnership with Eaton to jointly develop a fully prefabricated power system called 'AI PowerHouse', aiming to compress the total delivery cycle from 12-18 months to 150 days and reduce capital expenditure by 20%. However, there is divergence within the industry regarding the pace of SST adoption; some views suggest cost remains an obstacle, with AC architectures likely remaining mainstream for the next few years, making significant SST volume shipments visible only around 2027-2028. Storage Differentiation and Stock Selection Logic: Facing profit pressure caused by fluctuations in lithium battery prices, electrical equipment companies are seeking differentiated competition through grid-forming storage, frequency regulation services, and 'supercapacitor + battery' hybrid architectures. Based on these industry trends, the report reiterates its positive outlook on the sector, highlighting Wasion Holdings (with a valuation of only mid-teens P/E and a compound growth rate exceeding 20%) and TGOOD Electric (offering growth opportunities in transmission/distribution and prefabricated data center solutions).

Analysis framework

The report adopts a typical 'frontline research + industrial validation' analytical framework. Analysts went beyond macroeconomic data by attending industry exhibitions in Shanghai and conducting field visits to approximately 10 industry chain companies to obtain first-hand information on orders, technical parameters, and customer feedback. Logically, the analysis begins with supply-demand mismatches, comparing differences in delivery cycles and profit margins between Chinese and foreign manufacturers to verify the sustainability of exports. Secondly, combining the technological evolution route of AI computing infrastructure (such as 800V DC architectures), it evaluates the commercialization nodes and potential market sizes of new technologies (SST, prefabricated). Finally, industrial trends are mapped to specific targets, filtering out companies possessing alpha in both export capabilities and technological innovation.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Analysis of export competitiveness based on delivery cycle and cost advantages

  The report quantifies the supply-side advantages of Chinese enterprises by comparing delivery durations (6-12 months vs. 2-3 years) and gross margin levels (30-40% vs. teens) of electrical equipment between China and the U.S./Europe. This approach assesses their potential penetration in overseas markets rather than relying solely on qualitative descriptions.

• Competition and Strategy FrameworkProduct life cycle

  Identification of commercialization stage and divergence for new technologies (SST)

  For emerging technologies like solid-state transformers, the report distinguishes between different stages such as 'prototype/certification' and 'mass-market commercialization'. It records divergences within the industry regarding costs and mainstream architecture routes, helping investors understand that technology implementation is not a linear process and requires attention to the critical validation window of 2027-2028.

• Valuation MethodPE/PEG valuation

  Screening based on the matching degree of growth and valuation

  When recommending Wasion Holdings, the report uses the description of 'mid-teens P/E combined with >20% compound growth', implicitly applying PEG valuation logic. This involves finding targets whose valuations do not fully reflect growth rates in industries with determined growth prospects.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Wasion Holdings (3393.HK)

  Top pick, benefiting from export growth and domestic data center investments

  Strengths

  Valuation is attractive (mid-teens P/E), with compounded profit growth exceeding 20%

  Comparison

  Possesses stronger export growth attributes compared to pure domestic demand targets

• TGOOD Electric (300001.SZ)

  Top pick, new growth drivers from prefabricated solutions and SST cooperation

  Strengths

  Strategic partnership with Eaton to develop a full-chain power supply solution for AI data centers; leads in prefabricated delivery capabilities; recently won bids for Tencent and Huaneng projects

  Comparison

  Possesses superior system integration advantages over traditional transformer manufacturers in the prefabricated data center power field

• Eaton (ETN.US)

  Technology leader, SST products landing in the Chinese market

  Strengths

  First to release medium-voltage SST 2.0 with actual operating cases; strong capability in setting technical standards

  Weaknesses

  U.S.-version SST design parameters differ from the Chinese version, requiring adaptation to local needs

  Comparison

  Commercialization progress is ahead compared to most domestic manufacturers still at the prototype stage

Key data

• Transformer Delivery Cycle ComparisonChina 6-12 months vs. West 2-3 yearsOne of the core competitive advantages of Chinese suppliers
• Gross Margin for Transformers in U.S. Market30%-40%+Significantly higher than the double-digit level in China
• Eaton SST Specifications2.5MW / 98.5% Efficiency / >99.999% AvailabilityTargeting the 10kV to 800V DC architecture for AI data centers
• TGOOD Electric Prefabricated Delivery Cycle150 DaysA significant reduction compared to the traditional substation cycle of 12-18 months
• Wasion Holdings Growth Indicators>20% CAGR / Low-teens P/ECore financial characteristics of the report's top pick

Impact & implications

The report suggests that China's electrical equipment industry is shifting from a purely domestic infrastructure-driven model to a dual-drive model of 'global computing infrastructure + exports'. For enterprises, seizing the opportunity window of the U.S. data center gap and domestic prefabricated transformation will be key to performance divergence in the next 2-3 years. Technologically, although new technologies like SST face short-term controversies over cost and standards, the direction they represent—DC systems and high density—is a long-term consensus. Companies that layout early and complete verification with top-tier customers (e.g., Tencent, telecommunications operators) will gain first-mover advantages.

Risks

• Adoption speed of new technologies such as SST in the Chinese market may be slower than expected; uncertainties exist regarding cost reduction and the release of high-density demand.
• Scale-up expansion of Chinese suppliers in the U.S. market is constrained by product certification, testing, and final acceptance by end-customers.
• Profitability of the energy storage business is affected by fluctuations in lithium battery prices, and cost transmission mechanisms are not yet fully established.

What to watch

• The actual launch rhythm of the 2027 U.S. AI data center procurement cycle and the order conversion rate for Chinese manufacturers.
• Volume validation of solid-state transformers (SST) and ASP downward trends in 2027-2028.
• Actual penetration rate of prefabricated modules under China's 2 trillion yuan data center capital expenditure plan.
• Progress of product certifications for Chinese electrical equipment manufacturers in the U.S. and CSP customer onboarding.